United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
C. BRACK SENIOR U.S. DISTRICT JUDGE.
2013, Ms. Stella Vigil filed a lawsuit against Zia Credit
Union (Zia) in New Mexico state district court to recover
money that Zia had seized from a joint account that Ms. Vigil
held with her daughter. CUMIS Insurance Society, Inc.
(CUMIS), Zia's insurer, defended Zia in the state suit
subject to a reservation of rights. In February 2018, after a
jury found in Ms. Vigil's favor, the state court issued
its final judgment, which included an award of over $650, 000
in damages. Thereafter, Zia moved to file a third-party
complaint in the state action against CUMIS, seeking a
declaratory judgment regarding the scope of coverage under
the applicable insurance policy. CUMIS then filed a complaint
in this Court, seeking declaratory relief on the issues of
whether CUMIS owes a duty to defend and/or indemnify Zia in
the underlying state case. Zia moved to dismiss or stay
November 2018, Zia satisfied the judgment and the state court
dismissed Ms. Vigil from all further proceedings in the state
case. CUMIS then removed Zia's third-party complaint to
this Court. Zia now moves to dismiss CUMIS's complaint in
the lawsuit CUMIS filed and to remand the third-party
complaint that CUMIS removed. CUMIS moves to consolidate the
two cases. After considering the parties' briefs and the
relevant law, the Court will deny CUMIS's motion to
consolidate and grant Zia's motion in part-staying this
case. The Court will not rule on Zia's motion to remand,
which is pending before United States District Judge Martha
Vigil opened a shared savings account at Zia Credit Union
with her daughter, Ms. Cassandra Trujillo, so that Ms.
Trujillo could manage the account in the event of Ms.
Vigil's illness or death. (Doc. 1-B ¶¶ 3-5.)
Years later, Ms. Trujillo defaulted on a loan with Zia.
(Id. ¶¶ 21-24.) Ms. Vigil did not co-sign
on the loan or pledge the funds in her savings account to
secure Ms. Trujillo's loan. (Id. ¶ 22.)
Although Ms. Trujillo had never contributed any funds to the
joint savings account, Zia seized all of the funds in the
account to satisfy the debt, against Ms. Vigil's and Ms.
Trujillo's wishes and in contravention of state law.
(Id. ¶¶ 26-28, 34.) Ms. Vigil filed suit
against Zia in state court on January 17, 2013. (See
Id. at 1.)
insured Zia under a “Management and Professional
Liability Policy.” (Doc. 1 ¶ 6; see also
Doc. 1-A.) Pursuant to this policy, CUMIS notified Zia on
February 7, 2013, that CUMIS would provide for Zia's
defense against Ms. Vigil's suit subject to a reservation
of rights. (Docs. 1 ¶ 9; 12-A.) In 2014, Ms. Vigil
offered to settle the lawsuit for $350, 000. (Docs. 12 at 2;
12-B.) Zia consulted with its counsel and concluded that
“there was ‘a substantial likelihood of an
adverse verdict in excess of policy limits' . . . [and]
demanded that CUMIS settle the case.” (Doc. 12 at 2
(quoting Doc. 12-C at 1).) CUMIS disagreed and refused to
accept Ms. Vigil's offer. (Id. (citing Doc.
12-D).) The case went to trial, and the jury returned a
verdict for Ms. Vigil. (Id. at 3.) The state court
entered final judgment on February 21, 2018, awarding Ms.
Vigil $650, 105.78. (Id.)
February 23, 2018, “CUMIS informed Zia that none of the
relief awarded” to Ms. Vigil is covered by the
insurance policy. (Id. (quoting Doc. 12-H)
(quotation marks omitted).) Zia filed a motion for leave to
file a third-party complaint in Ms. Vigil's lawsuit on
June 21, 2018, seeking a declaration from the state court
regarding CUMIS's duty to defend and indemnify Zia.
(See id.; Doc. 12-I.) Over three weeks later, CUMIS
filed its Complaint for Declaratory Relief in this Court,
seeking a declaratory judgment on whether it has a duty to
defend or indemnify Zia. (See Doc. 1.) Zia moved to
dismiss CUMIS's federal lawsuit in August 2018. (Doc.
12.) Several months later, CUMIS filed a motion to dismiss
Zia's third-party complaint in the state action. See
Vigil v. Zia Credit Union, D-117-CV-201300032, Mot. to
Dismiss (1st Jud. Dist. Nov. 9, 2018). Before that motion was
fully briefed, “Zia satisfied the judgment in favor of
Ms. Vigil[, ]” and the state court dismissed her from
the lawsuit entirely. (See 18cv1210, Doc. 12 at 2.)
With Ms. Vigil out of the state suit, CUMIS removed Zia's
third-party complaint to this Court (18cv1210, Doc. 1) and
moved to consolidate the two federal cases (Doc. 26). Zia
opposes the motion to consolidate (see Doc. 28) and
moves to remand the removed third-party complaint (18cv1210,
The Court will deny CUMIS's motion to
has moved to consolidate the two actions pending in federal
court because they pose “an identical question: whether
CUMIS's Management & Professional Liability Policy .
. . provides insurance coverage for” the judgment Ms.
Vigil obtained against Zia in the state case. (See
Doc. 26 at 1.) Referencing its motion to remand in 18cv1210,
Zia argues that removal was improper, thus CUMIS's
removed action is not truly “pending” and
consolidation is inappropriate under Federal Rule of Civil
Procedure 42. (See Doc. 28 at 3; see also
18cv1210, Doc. 5.) Judge Vazquez has not decided the motion
to remand in 18cv1210; consequently, “it would be
inappropriate and premature for the Court to consolidate
these cases.” See Great Am. Ins. Co. v.
Crabtree, No. CIV 11-1129 JB/KBM, 2012 WL 3656500, at
*20 (D.N.M. Aug. 23, 2010) (citing U.S. for Use of
Owens-Corning Fiberglass Corp. v. Brandt Constr. Co.,
826 F.2d 643, 647 (7th Cir. 1987) (“Rule 42(a) requires
that both actions be ‘pending before the
court' and an improperly removed action does not meet
this criterion.”)) (subsequent and internal citations
omitted). Thus, the Court will deny CUMIS's motion to
The Court will grant Zia's motion in part and stay the
seeks a declaration that it does not have a duty to either
defend or indemnify Zia in the underlying action.
(See Doc. 1.) Zia contends that the Court should
decline to exercise its jurisdiction over this lawsuit.
(See Doc. 12.) CUMIS filed this action under the
Declaratory Judgment Act, which confers discretion on the
Court to “declare the rights and other legal relations
of any interested party seeking such declaration . . .
.” 28 U.S.C. § 2201. (See also Doc. 1.)
To determine whether to exercise jurisdiction over
CUMIS's case, the Court must decide “whether
‘the questions in controversy between the parties to
the federal suit . . . can better be settled in the
proceeding pending in the state court.'”
Burlington Ins. Co. v. Las Cruces Gospel Rescue
Mission, Inc., No. 2:11-CV-0544-WJ-WPL, 2011 WL
13284626, at *2 (D.N.M. Oct. 12, 2011) (quoting Brillhart
v. Excess Ins. Co., 316 U.S. 491, 494 (1942))
(subsequent citation omitted).
The Tenth Circuit has adopted a five-factor test for
evaluating whether a district court should exercise its
discretionary jurisdiction over a declaratory judgment
action. See St. Paul Fire and Marine Ins. Co. v.
Runyon, 53 F.3d 1167, 1169 (10th Cir. 1995). These
 whether a declaratory action would settle the
controversy;  whether it would serve a useful purpose in
clarifying the legal relations at issue;  whether the
declaratory remedy is being used merely for the purpose of
“procedural fencing” or “to provide an
arena for a race to res judicata”;  whether use of a
declaratory action would increase friction between our
federal and state courts and improperly encroach upon state
jurisdiction; and  whether there is an alternative remedy
which is better or more effective.
Valdez v. Metro. Prop. & Cas. Ins. Co., 867
F.Supp.2d 1143, 1168 (D.N.M. 2012) (quoting St. Paul Fire
& Marine Ins. Co., 53 F.3d at 1169 (quoting
State Farm Fire & Cas. Co. v. Mhoon, 31 F.3d
979, 983 (10th Cir. ...